QS Research · Michael Burry's Scion Capital analyst template · 2006
Broadcom Inc. (AVGO)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -22% · upside +15%
The market is not missing the AI ramp — it is paying for it: at $293.69 (N1) the enterprise value of $1,439.07B (N25) is 28.0x TTM EBITDA of $51.44B (N27, N14), 33.6x TTM EBIT of $42.81B (N28, N12) and 16.15x TTM sales of $89.10B (N26, N10), the highest sales multiple in the listed peer set (S1). On today's earnings at today's 28.0x the shares are worth what they cost — EV of $1,439.07B less net debt of $37.10B = $1,401.97B of equity, or $293.69 on 4,773.63M shares (N24, N25, N8, N5, N1) — a 0% base case. The same base priced at 22x gives $229/share (-22%) and at 32x gives $337/share (+15%); the re-rating in either direction is taken from catalysts, not from the multiple itself — 22x on the 10-Q's flagged AI-driven semiconductor cyclicality and the ~$29B undiscounted AI-rack Backstop liability (S30, S34, S29), 32x on the Google/Anthropic capacity agreements through up to 2031 and the Q4 guide of ~$34.8B revenue with $21.7B of AI semis (S40, S90, S5). Neither test is met (a long needs +30% base, a short -30%), and the asymmetry is only about 1.5:1 against on multiples, so this is a watch rather than a pass: Q3 FY2026 revenue grew 86% y/y and FCF was $13,665M, 46% of revenue (S31, S5), so a flat multiple on a rising EBITDA base still makes money. What keeps the call from being a long is that the -40.7% drawdown from the 52-week high (N2) has not made the multiple cheap — 28.0x EBITDA is above NVDA's 22.5x and MSFT's 19.0x and 33.6x EBIT sits on EBITDA flattered by $8.06B of FY2025 intangible amortization against $574.0M of depreciation (S1, N27, N28, S28).
Key numbers
- Share price: $293.69
- Market cap: $1,401.97B
- Latest financial period: TTM to Aug 2, 2026
- Revenue (TTM): $89.10B
- EV / EBITDA (TTM): 28.0x
- P/E (TTM): 36.6x
The 15 boxes
- ✓ 1. Long-form business notes
Broadcom is a two-segment infrastructure technology company: semiconductor solutions sold mainly through distributors and OEMs/contract manufacturers, plus a large infrastructure software business that the FY2025 10-K organizes into five portfolios (Private Cloud incl. VMware, Mainframe, Cybersecurity, Enterprise Software, FC SAN). The XBRL six-year table shows the change since the FY2020 10-K: revenue $23.89B in FY2020 versus $63.89B in FY2025, operating income $4.01B versus $25.48B, operating cash flow $12.06B versus $27.54B, on capex of only $623M in FY2025. The FY2025 10-K frames the semiconductor business around AI data centers (custom XPUs, Ethernet switching, NICs, PHYs, optics, racks/systems) for hyperscalers and AI frontier-model customers, a framing absent from the FY2020 filing, which described mainframe/BizOps/cyber security software plus FC SAN.
- ✓ 2. Competitive advantage
The advantage is scale plus cash: revenue went from $23.89B (FY2020) to $63.89B (FY2025) while gross profit went from $13.52B to $43.29B, and FY2025 operating cash flow of $27.54B was produced against capex of only $623.0M. The 10-K backs that with a hard asset — about 19,000 patents and 2,170 pending applications as of November 2, 2025 — and with software customers see only as executable code, while it also calls the markets 'highly competitive' with competitors ranging from large international companies to niche players and with customers entering the markets. The limits are stated by the company: top five end customers were about 40% of FY2025 net revenue and semiconductor gross margin is typically lower than infrastructure software gross margin. The sources give no gross margin percentage, no return on equity or capital, no market share and no named competitor.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (quarter ended 2026-08-02) showed a sharp AI-led step-up: revenue $29.591B, +86% YoY, with AI semiconductor revenue $16.7B, +221% YoY and +54% QoQ. GAAP operating income was $15.955B (54% of revenue), Q3 operating cash flow was $14.197B and free cash flow $13.665B (46% of revenue). The 10-Q shows semiconductors at 70% of Q3 revenue and one distributor at 50% of Q3 revenue, while inventory rose to $4.523B and working capital to $31.335B. Q4 FY2026 guidance from the same-quarter release is ~$34.8B revenue, +93% YoY, and ~66% non-GAAP operating income margin.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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